One month after News Corp. succeeded in ousting Gemstar-TV Guide CEO Henry Yuen and CFO Elsie Leung, the interactive program guide vendor finalized its severance deals with the two executives, who had come under fire over concerns about the company's accounting methods.
Former Fox Cable Networks Group CEO Jeff Shell, who had been acting CEO, now has the post on a permanent basis. Gemstar is still searching for a new CFO, as News Corp. executive vice president for finance Paul Haggerty still holds that post on an acting basis.
Shell's official appointment as CEO follows a spate of negative news involving Gemstar in recent weeks, from financial restatements to legal setbacks.
On Nov. 4, the U.S. District Court for the Northern District of Georgia found that Scientific-Atlanta's Explorer 3000 and 8600 set-tops don't infringe on two of Gemstar's patents, and granted S-A's motion for summary judgment.
That followed a major International Trade Commission decision earlier this summer, in which Gemstar lost in a patent suit it had brought against S-A, EchoStar Communications Corp. and Pioneer Corp.
Gemstar, which had booked $113 million in licensing revenue from S-A in hopes of collecting that money through litigation, announced Oct. 31 it would restate financial statements from July 1999 through March 2002 in order to drop the S-A revenue from its books.
The company has also dropped plans to acquire video-on-demand vendor Diva Systems Corp. and Diva's interactive program guide patents, which Gemstar had agreed to purchase for $40 million in May. In a September securities filing, Gemstar disclosed that it wouldn't close the transaction, "as a result of certain conditions that had not been satisfied by Diva prior to closing."
In the same filing, Gemstar noted that S-A had sought to block Gemstar's Diva acquisition for antitrust reasons in August, by filing a complaint in the U.S. Bankruptcy Court for the Northern District of California.
Yuen and Leung were respectively granted $22 million and $7 million in cash severance payments, but Gemstar's plans to restate earnings could prevent them from receiving that windfall. The Sarbanes-Oxley Act, a federal law, would require Yuen and Leung to reimburse Gemstar if the restatements are a result of misconduct.
Gemstar said in a statement last week that Yuen and Leung's severance payments "will be held by the company in a segregated account for up to six months pending the possible deposit of all or a portion of such cash into an escrow."
Also last week, Gemstar said it's postponing its annual meeting until after it files restated results, but the company didn't say when it plans to complete the restatements.
In the meantime, Shell and Haggerty scheduled an "informational meeting of shareholders" on Nov. 19 in Los Angeles. Gemstar said it will give shareholders an update on "business operatoins," but no shareholder actions will be taken.
Shell and Haggerty will likely encounter some disenchanted shareholders, who have watched Gemstar's stock fall more than 90 percent in the last two years.
Shares in Gemstar, which faces a possible NASDAQ delisting for failing to file reports with the Securities and Exchange Commission, closed at Thursday at $4.05. The stock has plummeted from $28 since the beginning of the year.
Yuen remains non-executive chairman of Gemstar's board, and Leung will also keep her spot on the board.